FRANKFURT (MNI) – The average volume of eligible collateral in the
Eurozone banking system increased by 17.9% to 13.1 trillion in 2009
ensuring that the collateral pool did not pose systemic constraints on
ECB counterparties, the European Central Bank said in its Annual Report
on Monday.

Almost 60% of the overall increase in collateral was due to looser
central bank rules, which now have been partially extended into next
year.

“The overall volume of marketable assets eligible as a result of
the temporary measures to expand the list of eligible collateral
amounted to around E1.4 trillion at the end of 2009,” the report said.

By far the largest share (40%, or E5.5 trillion) of marketable
collateral consisted of general government debt. These instruments will
continue to enjoy looser collateral rules ahead.

“The average value of marketable and non-marketable assets put
forward by counterparties as collateral in Eurosystem credit operations
rose significantly, from E1.579 trillion in 2008 to E2.034 trillion in
2009,” the report said.

At the same time, the share of collateral put forward that was not
used to cover credit from monetary policy operations increased
“marginally on an aggregrate basis,” the ECB said.

“This suggests that insufficiency of collateral has not been a
systemic constraint on the Eurosystem’s counterparties, despite the
increasing volume of liquidity received in the refinancing operations,”
the ECB assessed.

Offering a breakdown of collateral put forward in its operations,
the ECB said that the average share of asset-backed securities decreased
from 28% in 2008 to 23% in 2009. This decline “was due to reductions in
market values and haircut increases, while the overall amount submitted
remained stable,” the report said.

Uncovered bank bonds accounted on average for around 28% of the
collateral submitted and thus comprised the largest class of assets put
forward as collateral in Eurosystem operations. The average share of
non-marketable assets increased from 12% in 2008 to 14% in 2009.

The average share of central government securities increased from
10% in 2008 to 11% in 2009, while the new asset classes which are
temporarily eligible accounted for around 3.8% of the total marketable
collateral put forward, the ECB said.

–Frankfurt bureau; +49-69-720142; jtreeck@marketnews.com

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